Comcast, Kozinski, and The Decline Of Class Actions

Nearly a year ago, I praised an objection Judge Alex Kozinski filed — as a consumer, not a judge — to a proposed class action settlement that he was a part of, and so I was dismayed to see a recent article noting Judge Kozinski’s complaint that “There’s a tendency for lawyers to buy themselves off” in class actions.

He’s missing the forest for the trees: whatever the problems of class actions, the “tendency” we need to worry about isn’t that plaintiffs’ lawyers might be able to settle these cases too soon, but that the cases aren’t filed at all because they’re too hard to win, even in the face of blatantly illegal conduct.

If you’re from the Philadelphia area, you know that the tallest building in the City is the Comcast Center, begun in 2005 and completed in 2008 at a cost of $540 million. What you may not know is that Comcast’s customers paid for the whole thing (and more) by way of a glaring antitrust violation.

Between 1998 and 2002, Comcast’s share of the “Philadelphia designated marketing area” — i.e., the surrounding counties of Pennsylvania, New Jersey, and Delaware* — grew from 23.9 percent to a whopping 77.8 percent. (See this brief, page 2.) In four years, Comcast went from controlling less than a quarter of the market to controlling over three-quarters of it. By 2007, Comcast still held 69.5 percent of the market.

Comcast wasn’t competing on price, and it didn’t grow that way by dramatically improving its services (I can tell you that from my personal experience!). Instead, it was buying entire cable companies within the Philadelphia area and swapping customers with other cable systems, like Time Warner. As a statistician and econometrician later established by comparing prices in the Philadelphia area to prices in comparable areas, Comcast’s anticompetitive behavior cost Philadelphia consumers a whopping $875,576,662 in inflated prices.

In December 2003, five customers and eight law firms filed an antitrust complaint against Comcast. The antitrust damages for any one customer aren’t much — probably under $1,000 for most — so the case was filed as a class action on behalf of all the customers in the area. Thus, before the case could reach the issue of whether or not Comcast actually violated antitrust laws, the case has to decide whether and how customers could bring their case as a class action.

Comcast unsurprisingly fought a war of attrition, so that the District Court didn’t get to class certification until May 3, 2007. Thereafter, the Third Circuit decided In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305 (3d Cir. 2008), prompting the District Court to go back around to re-certify the class again on January 7, 2010. Then the case was appealed, and the Third Circuit upheld the class certification on August 23, 2011 in Behrend v. Comcast Corp., 655 F.3d 182 (3d Cir. 2011). The Supreme Court granted certiorari, and issued its opinion on March 27, 2013.

That is, it took almost ten years to sort out whether 2 million current and former Comcast subscribers apparently bilked out of nearly a billion dollars could bring their claims as a class action. It reminds me of a case I argued earlier this year in front of the Third Circuit involving investors defrauded by a gigantic bank. The bank’s lawyer was trying to explain to the panel of judges why the bank had waited nearly two years after litigation was filed to bother arguing that it felt my client’s case had been filed in the wrong court, and in the course of that argument he claimed there was a difference between “calendar time” and “litigation time.” In “litigation time,” he argued, a big company could let issues sit unresolved for months, even years, without consequence. (Thankfully, I won, and the Third Circuit held the bank had engaged in an “unsavory tactical maneuver” by waiting so long.) 

Of course, in the Comcast case, the five vehemently anti-consumer Justices of the Supreme Court ruled against the consumers, chopping up the case with the outrageous speculation that, “for all we know, cable subscribers in Gloucester County may have been overcharged because of petitioners’ alleged elimination of satellite competition … while subscribers in Camden County may have paid elevated prices because of petitioners’ increased bargaining power vis-à-vis content providers … while yet other subscribers in Montgomery County may have paid rates produced by the combined effects of multiple forms of alleged antitrust harm; and so on.” It was more than a bit disingenuous for the Supreme Court to muse about “for all we know” while preventing consumers from actually answering that question with a jury trial, but the case soldiered on, in fractured pieces.

Two weeks ago, the plaintiffs’ lawyers and Comcast announced an anemic proposed settlement in which Comcast will pay $16.7 million and provide services “worth” $33.3 million. It’s a joke, but — despite Judge Kozinski’s complaints — there’s no use in blaming the plaintiffs’ lawyers here. They’re not “buying themselves off.” They fought the good fight, were dealt a crushing blow by the Supreme Court, and in the end salvaged the best deal they could, while Comcast walked off with an iron grip over the Philadelphia cable market, a gargantuan building, and a quarter-billion in profit to spare.

Now Comcast is building a new tower, too, right next to the first one, at a cost of $1.2 billion, another gleaming monument to the failure of American antitrust law. Next time you wonder why your cable bill, or your cell phone bill, or any of your other consumer expenses are so high, don’t blame a class action lawyer, blame the Supreme Court.

* In the case, the Philadelphia marketing area was defined as Berks, Bucks, Chester, Delaware, Montgomery and Philadelphia, Pennsylvania; Kent and New Castle, Delaware; and Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Mercer and Salem, New Jersey.

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